Electronic purchase auctions

What decides the success of an electronic auction?

Here you can see how to increase the chances of the auction you organize in making it more successful and increase the level of gained profit.

Before an auction

1. Specify precisely the requirements (if they have not yet been specified on the level of the request). In the case of purchase auctions, the size of the negotiated contract is what matters - it should be attractive enough to suppliers, so that they compete to win the order. Clear rules are also important for further cooperation, so that the suppliers have no doubts about the request/purchase they are competing for.

2. Set the parameters of the auction properly

·      Commencement date of the auction - it should be distant enough, in order to give the participants a chance to prepare for joining it. If the auction is a continuation of an e-enquiry, 3 working days are sufficient. Otherwise, it should last at least 5 days.

·      The time the auction will last - optimum time would be 20-30 minutes of the general time. Normally, the more intensive negotiations start in the extra-time which also extends the time of the auction.

·      Initial price - set the initial price attractive to the bidders. Remember that negotiations will change it anyway, so it is important not to discourage the bidders. In the case of a purchase auction you are not obliged to make the purchase, so the best way would be to set quite a high initial price. In the case of a sales auction, the initial price is the price at which you are able to sell a particular product.

·      Minimum and maximum overbid – minimum, so that suppliers do not outbid each other with small amounts and do not extend the auction; maximum, so that bidders do not make mistakes during the auction.

·      The range of visibility in the auction – during the auction, bidders will always be able to view their place in the ranking and the best price. However, they do not see the number of bidders. If there are only two companies that take part in the auction, avoid showing the participants the offer of the other bidder, since it will equal the highest offer in the auction, and, thus, will suggest to participants the number of competitors, and it may discourage the company that is second in the ranking to remain in the competition when the price discrepancy is high.

3. Do not forget to attach files with specifications, in a situation when the auction is not a continuation of a request for proposal and additional information. With attached specifications, bidders have no doubt what they are bidding for.